WellPoint Inc. (WLP) Posts Strong 3Q, Despite Higher Medical Bills

The second-largest managed-care firm by membership, after UnitedHealth Group Inc. (NYSE:UNH), posted a profit of $691.2 million, or $2.15 a share, up from $683.2 million, or $1.90 a share, a year earlier. Excluding items, such as net investment gains and acquisition-related costs, adjusted earnings climbed to $2.09 a share from $1.77. Revenue for the quarter declined 0.3% to $15.35 billion. Analysts polled by Thomson Reuters had most recently forecast earnings of $1.84 a share, on revenue of $15.31 billion.

“Our third quarter results compared favorably to our expectations and reflected more consistent execution across our businesses. We are preparing for a successful Amerigroup integration and have recently taken steps to better align business level leadership to execute on the growth opportunities before us,” Interim President and CEO John Cannon said in a statement.

Operating margin for the company increased 6.6 percent from 6.4 percent. WellPoint, Inc. (NYSE:WLP)’s benefit-expense ratio, reflecting the portion of insurance premiums used for patient care, was 85.4 percent, compared with 85.1 percent a year earlier. Segment wise, company’s biggest contributor, Commercial business revenues, declined 3.4 percent to $8.36 billion, while the revenues from the consumer business jumped 6.6 percent to $4.88 billion. Medical enrollment for the quarter declined 2.5% to 33.5 million members.

The health-benefits provider’s earnings have been under pressure on account of rising medical costs and a decline in membership enrollment. The company has also been diversifying its revenue stream beyond employer-sponsored health insurance, by buying the contact-lens retailer 1-800 Contacts Inc.

In a deal, last month, that will make WellPoint the biggest Medicaid insurer, shareholders of Amerigroup approved selling the Medicaid-focused health insurer to WellPoint in a $4.46 billion deal, expected to close during the fourth quarter. The deal will also help WellPoint, Inc. (NYSE:WLP) to compete for Medicaid patients who also qualify for Medicare.

WellPoint, Inc. (NYSE:WLP) reduced its outlook for the full year operating revenue to $60.7 billion from $61 billion, and expects adjusted earnings in a range of $7.30 to $7.40 per share. The company also declared a quarterly dividend of $0.2875 per share, payable on December 21 to shareholders of record at the close of business on December 7, 2012.

WellPoint, Inc. (NYSE:WLP)’s shares have dropped 7.6 percent this year up till now. The Company’s shares were inactive premarket and closed Tuesday at $61.20.